So when British politicians propose that EU political integration should slow or that the EU should prioritize some other objective (e.g. the Single Market), that is not merely seen as unattractive—it is impossible.

The reasons why are economic. As was widely discussed in the UK debate about the euro in the 1990s and early 2000s, to make a single currency such as the euro work, one needs an adequate combination of trade integration, similarity of economic cycles (so that one size fits all interest rate and exchange rate policies do indeed fit all), capital and labour mobility (to offset any “asymmetries” in economic shocks – that is, economic shocks hitting some parts of the Eurozone harder than others) and fiscal transfers (to compensate for any large or long-term differential performance that is not offset by capital and labour mobility).

The Eurozone has fairly good trade integration, some material differences in economic cycles (though not especially larger than the differences between regions within the UK or US), and fairly high capital mobility. But even when they occur at around the same time (so cycles are not out), economic shocks affect some parts of the Eurozone much worse than others (as we have seen in the Eurozone crisis). And, Ireland excepted, labour mobility is not particularly high (despite all the complaints about immigration in some Member States).
That means—as has been argued all along—that for the Eurozone to work over the longer term there will need to be much more significant fiscal transfers between regions.

Which is precisely what I articulated a few days ago. And, of course, in order for the economic scenario to work, there must be more political union.

If adequate economic mechanisms and political union are not introduced, it is believed that the Eurozone crisis will return and anti-European sentiment will (rightly) increase, ultimately destroying the Eurozone and the EU project as a whole. Banking union and constraints upon Member State budgets have been introduced. Even more political integration is on the way.

So in the Eurozone, the answer to increased Euroscepticism is not seen as any form of rowing back on integration. Quite the opposite — Euroscepticism has arisen because political integration had not proceeded rapidly enough.

For the Eurozone and EU to survive at all, deeper political integration, including Eurozone-level tax and spending decisions and democratic mechanisms to oversee them plus reduced control over tax and spending decisions for Member State, are an existential necessity.

Quite so. Lilico's conclusion implies that the current referendum may be very far from being the last turning point for the UK in its relationship with the EU.

This all means current debates about whether the UK will have a referendum and how folk will vote is of only passing significance. What counts fundamentally to whether the UK stays in the EU after about 2020 is whether there are any non-euro members of the EU at all, given the existential economic necessity of the Eurozone forming into a deeper political union. At present that seems highly unlikely.

It may be that, regardless of the result of the referendum on July 23, the UK will have another chance to choose its destiny within the European Union. That is the optimistic view.

That must not be allowed to happen. For all that the Leave campaign have been incompetent in being able to articulate this unpleasant future, the Remain campaign have expressly avoided telling the British people the inevitable future of political and economic integration.

If the British do not vote to Leave the status quo, only the extremely dishonest would take that to mean that they have signed up to a federalist future.

1 comment:

I understand the economic argument for both staying and leaving. I think short term we as the UK would suffer, but over a decade would recover and surpasss that of what is left of Europe.

My concerns are political, social and judicial.

Why is it Merkel can invite as many non-vetted imigrants without consulting her EU partners? Why is it the un-elected Junker can threaten the UK for daring to have a democratic process?Why is it, France does not arrest, charge and jail imigrants on the Calais run who are putting drivers in risk by placing trees across the road. And why is it Hollande has quietly passed a law that says his Gengearme (sp) are not allowed to confront these people.